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Joseph Carlson - Netflix Valuation

The document provides an analysis of Netflix's valuation. It summarizes that Netflix doubled its subscriber base from 104 million in 2018 to 203 million in 2020, representing 40% annualized growth. The analyst estimates Netflix will grow subscribers at 15% annually to reach 350 million by 2025. Netflix has also been able to grow revenue per user from $9.88 in 2018 to $11.02 in 2020 while raising prices. The analyst projects earnings per share to reach $30 by 2025, giving Netflix a potential share price of $900 by 2025 for a return of 11% annually. The analyst believes strongly in Netflix's future as the leading media company.

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448 views4 pages

Joseph Carlson - Netflix Valuation

The document provides an analysis of Netflix's valuation. It summarizes that Netflix doubled its subscriber base from 104 million in 2018 to 203 million in 2020, representing 40% annualized growth. The analyst estimates Netflix will grow subscribers at 15% annually to reach 350 million by 2025. Netflix has also been able to grow revenue per user from $9.88 in 2018 to $11.02 in 2020 while raising prices. The analyst projects earnings per share to reach $30 by 2025, giving Netflix a potential share price of $900 by 2025 for a return of 11% annually. The analyst believes strongly in Netflix's future as the leading media company.

Uploaded by

Nicoletta Mariani
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Joseph Carlson 
Investor Tier Research 

 
Netflix Valuation  
Feb 11th, 2021 

 
Subscriber Growth 

 
 
At the start of 2018, Netflix had 104 million subscribers. Over the course of 2 years, they 
roughly doubled that amount increasing to 203 million subscribers. That’s a two year 
annualized subscriber gain of 40%. On a more conservative estimate going forward, I 
believe that Netflix will have annualized subscriber gains of 15%.  
 
Here’s 15% year over year subscriber growth for Netflix:  
 
*subscribers in millions 
2021: 233.45 
2022: 268.46 

 
 

2023: 308.72 
2024: 355.02 
2025: 408.27 
 
At the end of 2025, assuming 15% annualized subscriber growth, Netflix will have 408.27 
million subscribers. Let’s take an even more conservative estimate than this and assume 
they will only reach 350 million. 
 
Netflix pricing 
 

 
 
Netflix has been able to grow its subscriber base while increasing the price​. ​The original 
price was $8/month for premium, which now stands at $18/month now. Netflix’s basic 
price has remained low, only increasing to $9/month. 
 
Since the start of 2018, the average revenue per membership has grown from $9.88 to 
$11.02, despite significant F/X headwinds. That is 11% growth over two years. 
 

 
 

Netflix likewise has grown its earnings per share dramatically over the past 4 years. It 
increased from $1.25 in 2017 to $6.08 in 2020. Between strong price control and 
subscriber growth, I estimate earnings per share of at least $30 by the end of 2025. 
 

 
 
In this case, if Netflix traded at a 27 forward PE ratio (in-line with companies that enjoy a 
subscription-based business model like Netflix’s), at 33 EPS. Netflix would have a $900 
share price. Based on today’s trading price that is an annualized 11% return over the next 
5 years. I believe over time these projections will prove to be conservative.  
 
I believe strongly in the future of Netflix. I would not be surprised if it grew into the 
biggest media company in the world. It’s founder-led by a thoughtful long term focused 
CEO. It has a massive scale advantage with already 200+ million subscribers. It has at 
least 5x the engagement of its closest competitor. It has industry-leading low subscriber 
churn. It’s nearing free cash flow positive and will no longer need external financing. And 
unlike its legacy media peers, it’s not cannibalizing existing revenue streams by growing 
its subscriber base. For these reasons, I have made Netflix a core holding in the Story 
Fund. 
 
If you have enjoyed this valuation, please consider joining the Patreon: 
https://www.patreon.com/josephcarlson 
 
On top of supporting the creation of more content like this. You also gain access to a 
private investment discord with over a thousand active members, exclusive videos and 
in-depth research, instant notifications of every buy and sell I do. 

 
 

 
-Joseph Carlson 
 
 
 
 

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